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Posts tagged ‘debt ratio’


Mortgage Fundamentals: Pre-Approved Vs. Pre-Qualified

What’s the difference?

Loan AppThere are several stages of the Canadian mortgage rate approval procedure when you apply for a mortgage. It is essential to understand what they are and what they really mean.

What is Pre-Qualification?

This is the initial step of the low mortgage rate approval process wherein your mortgage broker takes a look at your overall earnings and financial obligation. The broker will determine your affordability by taking a look at your debt ratios (Gross Debt Service GDS and Total Debt Service (TDS)).

There are going to be a variety of conditions that you will need to meet in the pre-qualification before it is fully approved.

What is Pre-Approval?

Once accomplished, the mortgage broker will send your application to a lender who confirms your information with a certificate of approval. This generally includes a Canadian mortgage rate guarantee, which is typically valid for 60 and 120 days. You must comply with all the terms and conditions prior to approval.

What is Approval?

You have been fully approved for the mortgage at the best mortgage rate detailed in the agreement.

Advantages of a Mortgage Pre-Approval

A mortgage pre-approval enables you to lock in an interest rate. It offers additional security in understanding that you satisfy the initial financing requirements. It also enables any seller to understand that you are a serious buyer.

Most importantly, you understand clearly what you are able to purchase when you are buying a home.

Documents Required for a Pre-Approval

  • Personal identification
  • Income information
  • Bank accounts
  • Loans and other financial obligations
  • Proof of financial assets
  • Confirmation of the deposit and funds to pay for the closing cost

Each and every house hunt begins with a mortgage pre-approval. Start your quick online application today.


How to Know When You’re Ready to Purchase a Home

Think you are ready to be a homeowner? Here’s exactly how you can tell!

1) You have a budget

Factor in homeowner’s insurance coverage, property tax, fees, upkeep costs, and the best  available home mortgage rate.

2) You have a sizeable down payment.

Generally, you’ll need a down payment worth 20 % of the house price.

3) You have a reliable source of income.

Getting a home is a long-term financial dedication, so you’ll require a steady income to cover those month-to-month mortgage payments.

4) You have an emergency savings fund.

If you have enough money to cover three to six months of your living expenses, you’re one step closer to being prepared.

5) You have your financial obligations under control.

Lenders like to ensure you’ll have more than enough money each month to pay your living expenses. Before they’ll give you a low mortgage rate, they take a look at your debt-to-income ratio.

6) Your credit report is in good condition.

You don’t have to have best credit to become a homeowner; however a good history can help you lower the interest payments on your Canadian mortgage rate.

7) You can make a long-term commitment.

Are you prepared to stay put for a minimum of three to five years? Normally, that’s how long you’ll have to keep the house in order to recoup your trading expenses.

8) You are prepared to become a property owner.

Don’t buy simply because you can. You have to ensure you’re ready.


Ottawa Drops the Hammer on Mortgage Rules

Back in April, Finance Minister Mark Carney remarked that “in exceptional circumstances, if there are issues that threaten financial stability, such as household debt… the bank could use monetary policy for that purpose.”

Just three months later, those exceptional circumstances have become reality.

On Wednesday, the Federal Government made their move to further tighten mortgage rules, addressing concerns over high Canadian household debt.  Read more »


The Ripple Effect: How the European Financial Crisis Will Impact Canadians

News of increased financial strain in Spain today has caused the Bank of Canada to brace for a ripple effect on the other side of the ocean. Any spillover from the increasingly vulnerable European market is expected to carry over to North American, rocking the fragile U.S. banking sector before it lands on the doorstep of Canadian homeowners.

Households with high debt will be the first to feel the impact. Already debt-burdened households could begin defaulting on their mortgages as historically low rates begin to rise and  banks begin to tighten their lending restrictions in response to growing uncertainty. From there, it’s a domino effect of job loss, a housing freeze and decreased market action. Read more »